Setting Product Strategy
What is a Product?
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Anything that can be offered to a market for
attention, acquisition, use, or consumption
and that might satisfy a want or need.
Includes: physical product, service,
information, experience, person, place,
organization, ideas, or mixes of these entities.
Figure:
Three Levels of
Product
Example: Hotel
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Core benefit: rest and sleep.
Actual product: bed, bathroom, towels, desk,
closet, or food.
Augmented product: restaurant, gym, man’s
suit, or remembering consumers’ special
needs.
Example: Sony Camcorder
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Core benefit: a convenient, high-quality way
to capture important moments.
Actual product: Sony Camcorder.
Augmented product: warranty, instructions,
quick, repair service, or toll-free telephone
number.
When Do a Firm Advertise the
Core Benefit?
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Innovated product
Chaos stage
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E.g. The war of hamburger among McDonald’s,
Burger King and Wendy. Wendy: Where is the
beef ?
打回核心的第一家廠商，雖然會引起別人跟進，但
讓人印象最深。
Product Classifications
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Durability
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Nondurable goods → many locations, small
markup, and heavily advertise.
Durable goods → more personal selling and
service, higher margin, and more seller
guarantees.
Timing of quality identification
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Search goods
Experience goods
Credence goods
Continuum of Evaluation for Different Types of Products
Consequence of High in Experience
and Credence Qualities
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Service consumers generally rely on word of
mouth rather than advertising.
Consumers rely heavily on price, personnel,
and physical cues to judge quality.
Consumers are highly loyal to service
providers who satisfy them.
In one-shot relationships, may a high price
signal a high quality?
Is it possible that a low price may signal a
high quality?
Product Classifications
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Consumer-goods classification
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Convenience goods – staples, impulse goods and
emergency goods.
Shopping goods
Specialty goods
Unsought goods
Marketing considerations for consumer
products
Drift principle
Individual Product Decisions
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Product attributes
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Product quality – performance & conformance
Product features
Product style and design
Branding
Packaging
Labeling
Product support services
Packaging
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Primary container, secondary package, and
shipping package.
Functions: contain and protect the product,
describe the product, attract attention, and
create instant consumer recognition of the
company or brand.
Case: FedEx
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Federal Express  FedEX
隔夜快遞代稱 ~to send an overnight
shipment~
貨車飛機包裹都會刻上The World On Time
Packaging
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In an average supermarket, which stocks
15,000 to 17,000 items, the typical shoppers
passes by some 300 items per minute.
More than 60% of all purchases are made on
impulse.
The package may be the seller’s last chance
to influence consumers.
Packaging – Examples
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Skippy Squeez’It,
Heinz’s EZ Squirt,
Dutch Boy, 可口可樂
曲線瓶, and 郭元益
黃金喜餅
Failure: Planters
Lifesavers’s BrikPacs, Aunt Jemima
Labeling
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Functions: identify the product or brand,
describe the product, and promote the
product.
Legal concerns
E.g. Dr. Bronner’s Magic Soaps
Product Mix
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Width: how many different product lines the
company carries.
Length: the total number of items in the mix.
Depth: how many variants are offered of each
product in the line.
Consistency: how closely related the various product
lines are in end use, product requirements,
distribution channels, or some other way.
Example: P&G, 花王.
Product-Mix Width and Product-Line Length for Proctor
& Gamble Products
Product-Mix Width
Detergents
Toothpaste
Ivory Snow Gleem (1952)
(1930)
PRODUCT- Dreft
LINE
(1933)
LENGTH
Crest (1955)
Disposable
Bar Soap
Diapers
Paper
Tissue
Ivory
(1879)
Pampers
(1961)
Charmin
(1928)
Kirk’s
(1885)
Luvs
(1976)
Puffs
(1960)
Tide
(1946)
Lava
(1893)
Banner
(1982)
Cheer
(1950)
Camay
(1926)
Summit
(1992)
Product Line Decisions
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Product-line analysis
Product line length is influenced by company
objectives and resources, e.g. up-selling, crossselling, or protecting against economic swings.
Vertical differentiation → Line stretching:
downmarket stretch, upmarket stretch, or two-way
stretch
Horizontal differentiation → Line filling
Line modernization, featuring and pruning
Product-Item Contributions to a Product Line’s Total Sales
and Profits
Is it a good idea to drop the 5th product in
the last slide? If not, what may be the
reasons?
Case: American Iron and Steel
Market
Source: The Innovator’s
Solution (2003)
Downmarket Stretch
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Examples: Rolex’s Tudor, Benz’s Smart.
Reasons: growth opportunity, tie up lowerend competitors, or the middle market is
stagnating or declining.
Branding: individual name, blanket family
name, or separate family names for all
products.
Risk of Cannibalization
Upmarket Stretch
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Reasons: more growth, higher margins or
full-line manufacturers.
Examples: Toyata’s Lexus, Nissan’s Infiniti,
and Honda’s Acura.
The examples above invented entirely new
names rather than using or including their
own names.
Two-way Stretch
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Marriott hotels & resorts
L'ORÉAL PARiS – LANCOME, SHU
UEMURA, and BIOTHERM (700~4000);
L’OREAL PARiS (500~1000); MAYBELLINE &
GARNIER (100~400).
Toyota
Cannibalization
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Consumers have two segments, H & L.
Given quality q, H’s valuation is 5q, L’s
valuation is 2q, and the unit cost is q2/2.
What are the efficient quality levels for H and
L respectively?
Is it optimal for the firm to provide the twoitem product line with efficient quality levels?
Is it always optimal for the firm to provide a
product line?
Line Filling
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Add more items within the present range of
the line.
Motives: incremental profits, satisfying
dealers, excess capacity, full-line company,
and keep out competitors.
Weber’s Law: just-noticeable difference.
Risk of cannibalization
Line Filling – Examples
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Sony’s walkman – solar-powered and
waterproof, MiniDisc, CD, or Memory Stick.
Howard hotels, resorts, and suites
Line Modernization, Featuring
and Pruning
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人潮創造者 & 旗艦產品。
Line pruning
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E.g. Unilever: 1600 → 970 → 400;
Hyundai’s Kia: 30→20.
Brand
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Definition: a name, term, sign, symbol, design,
or a combination of them, intended to identify
the goods or services of one seller or group
of sellers and to differentiate them from those
of competitors. (AMA)
Six levels of meaning: attribute, benefits,
values, culture, personality, and user.
Building Brand Identity –
Samsung
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Logo – blue color, written in English, and “S” &
“G” partially break out of the oval to connect
the interior and the exterior.
Slogan – conveying Samsung’s desire, and
the “All” in the slogan.
Brand Equity
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The positive differential effect that knowing
the brand name has on customer response to
the product or service.
Measure: the extent to which customers are
willing to pay more for the brand.
Tide, Heinz → 100%; Coca Cola → 50%;
Volvo → 40%.
Brand valuation: Coca Cola - $70 billion;
Microsoft - $65 billion; IBM - $52 billion.
Branding Decisions
1.
2.
3.
4.
5.
6.
Brand or No brand
Brand-sponsor decision
Brand-name decision
Brand positioning
Brand-strategy decision
Brand-management decision
Brand or No Brand?
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Advantages of branding: processing orders
and track down problems, legal protection,
loyal customers, segmenting markets, and
the corporate image.
Advantages of no branding: cheap (national
brand: 20~40% off, store brand: 10~20% off).
Brand-Sponsor Decision
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Manufacturer brand (national brand)
Distributor brand (store brand or private label), e.g.
Wellcome, Carrefour – past, now.
Licensed brand name
Co-branding: the practice of using the established
brand names of two different companies on the same
product.
Ingredient branding
The Situation of Private Label
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2005年ACNielsen調查報告-1
2005年ACNielsen調查報告-2
If a store brand is not profitable, are
there other reasons for the retailer to
develop the store brand?
If you have owned a national brand in
the market, will you produce the same
product for a retailer’s store brand?
Brand-Name Decision
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Individual names
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Blanket family names
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E.g. Sony, Hitachi, and Panasonic.
Separate family names for all products
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E.g. P&G, Toyota.
E.g. 黑松公司 – 碳酸飲料 → 黑松, 果汁 → 綠洲,
咖啡 → 韋恩.
Corporate name combined with individual
product names
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E.g. 統一純喫茶, 統一茶裏王.
Brand-Name Selection
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Suggest something about the product’s
benefits and qualities, e.g. OFF! bug spray.
Easy to pronounce, recognize, and remember,
e.g. Tide, Qoo.
Distinctive, e.g. Kodak, Oracle.
Extendable, e.g. Amazon.
Translate easily into foreign languages, e.g.
Exxon.
Capable of registration and legal protection
Brand Positioning
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Product attribute, e.g. Dove, Compaq.
Benefit, e.g. Volvo – safety.
Beliefs and values
Brand-Strategy Decision
Product Category
Brand
Existent
New
Existent
Line
Extensions
Brand
Extensions
New
Multibrands
Diversification
Line Extensions
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優點：存活率較高，利用過剩產能，滿足多樣
化需求，防禦競爭者，獲得更多貨架空間。
缺點：品牌可能喪失特定意義，所增加之銷售
額不足以抵補發展和促銷成本，產品線競食
（Cannibalization）。
Branded variants (品牌變體策略): specific
brand lines supplied to specific retailers or
distribution channels.
Brand Extensions
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優點：消費者較易認同與接受、節省廣告成本。
缺點：新產品失敗會影響對原產品的評價、品
牌可能不適用於新產品（如：HCG牙刷）、
品牌稀釋（如：皮爾卡登）。
Multibrands
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優點：樹立不同特色，吸引不同購買動機的顧
客，較多貨架空間，保護主要品牌。
缺點：每一品牌市場佔有率小，廣告成本較大，
Cannibalization。
Example: 海倫仙度絲，潘婷，沙宣，飛柔。
Peter Lynch’s Comment on
Diversification
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Over-Diversification → Diworseification
Examples
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Mobil Oil（美孚石油） purchased Marcor Inc.
(retail industry).
吉列曾收購藥廠、電子錶廠。
通用食品曾擁有中國餐館、玩具公司、旅行社、大
賣廠、鞋類產品等。
The Product Life Cycle
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Product development
Introduction
Growth
Maturity
Decline
Figure: Sales and Profit Life Cycles
Introduction Stage of PLC
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Sales: low
Costs: high cost per customer
Profits: negative
Marketing Objective: create product
awareness and trial
Product: offer a basic product
Price: use cost-plus formula
Distribution: build selective distribution
Promotion: heavy to entice product trial
Growth Stage of PLC
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Sales: rapidly rising
Costs: average cost per customer
Profits: rising
Marketing Objective: maximize market share
Product: offer extension, service, warranty
Price: penetration strategy
Distribution: build intensive distribution
Promotion: reduce to take advantage of demand
Maturity Stage of PLC
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Sales: peak
Costs: low cost per customer
Profits: high
Marketing Objective: maximize profits while
defending market share
Product: diversify brand and models
Price: match or best competitors
Distribution: build more intensive distribution
Promotion: Increase to encourage brand switching
Maturity Stage of the PLC
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Modifying the Market: Increase the
consumption of the current product.
How?
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Look for new users and market segments, e.g.
Johnson & Johnson.
Reposition the brand to appeal to larger or fastergrowing segment
Look for ways to increase usage among present
customers, e.g. Campbell, Amazon.
Modifying the Market
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The WD-40 company’s
knack for finding new
uses has made this
popular substance one
of the truly essential
survival items in most
American homes.
Maturity Stage of the PLC
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Modifying the Product: Changing
characteristics such as quality, features, or
style to attract new users and to inspire more
usage.
How?
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Improve durability, reliability, speed, taste
Improve styling and attractiveness
Add new features
Expand usefulness, safety, convenience
Case: Yamaha Piano
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當山葉(Yamaha)控制40%的全球鋼琴市場時，
總需求每年下降了10%。
山葉發現大多數的鋼琴都閒置，並成為家中最
大沾灰塵的家具，且都未曾調音。似乎許多人
擁有鋼琴，但很少彈奏。人們並不想投資時間
來彈奏鋼琴。
因此，山葉決定增加市場上數百萬台鋼琴的價
值，開發複雜的數位與光學科技，可在鋼琴上
彈奏出專業鋼琴師的演奏。數位鋼琴的出現，
活化了鋼琴產業，也增加鋼琴維修的市場。
Modifying the Product
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Crayola has added a steady stream of new colors, forms, and
packages.
Maturity Stage of the PLC
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Modifying the Marketing Mix: Improving sales
by changing one or more marketing mix
elements.
How?
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Cut prices
Launch a better ad campaign
Move into larger market channels
Offer new or improved services to buyers
Decline Stage of PLC
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Sales: declining
Costs: low cost per customer
Profits: declining
Marketing Objective: reduce expenditures and milk
the brand (harvesting or divesting)
Product: phase out weak items
Price: cut price
Distribution: selective--phase out unprofitable outlets
Promotion: reduce to minimal level
Product Life Cycles
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The PLC concept can be used to analyze a
product category, a product form, a product,
or a brand.
Not all products exhibit a bell-shaped PLC.
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Growth-slump-maturity pattern
Cycle-recycle pattern
Scalloped pattern
Style, Fashion, Fad
Practical Problems of PLC
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Hard to identify which stage of the PLC the product
is in.
Hard to pinpoint when the product moves to the next
stage.
Hard to identify factors that affect product’s
movement through stages.
Hard to forecast sales level, length of each stage,
and shape of PLC.
Strategy is both a cause and result of the PLC.